Defendant argues the trial court erred by finding that
North Carolina law did not apply. We disagree.
The National Bank Act (NBA) provides that a national bank may
charge interest on loans "at the rate allowed by the laws of the
State . . . where the bank is located[.]" 12 U.S.C. § 85 (2000).
Section 85 "sets forth the substantive limits on the rates ofinterest that national banks may charge." Beneficial National Bank
, 539 U.S. 1, 9, 156 L. Ed. 2d 1, 9 (2003). 12 U.S.C.
§ 86 "sets forth the elements of a usury claim against a national
bank, provides for a 2-year statute of limitations for such a
claim, and prescribes the remedies available to borrowers who are
charged higher rates and the procedures governing such a claim."
"In actions against national banks for usury, these provisions
supersede both the substantive and the remedial provisions of state
usury laws and create a federal remedy for overcharges that is
exclusive, even when a state complainant, as here, relies entirely
on state law." Id.
at 11, 156 L. Ed. 2d at 10. In fact,
"[b]ecause [Sections] 85 and 86 provide the exclusive cause of
action for such claims, there is, in short, no such thing as a
state-law claim of usury against a national bank." Id.
12 C.F.R. § 7.4001 (2007) provides: "The term 'interest' as
used in 12 U.S.C. 85 includes any payment compensating a creditor
or prospective creditor for an extension of credit, making
available of a line of credit, or any default or breach by a
borrower of a condition upon which credit was extended." Moreover,
12 C.F.R. § 7.4008 identifies the types of state laws that are
preempted with respect to national banks' lending and other
With respect to non-real estate lending activities, 12
C.F.R. § 7.4008 (2007) provides, in pertinent part, as follows:
(a) Authority of national banks
. A national
bank may make, sell, purchase, participate in,
or otherwise deal in loans and interests in
loans that are not secured by liens on, or
interests in, real estate, subject to such
terms, conditions, and limitations prescribedby the Comptroller of the Currency and any
other applicable Federal law.
. . .
(d) Applicability of state law
(1) Except where made applicable by
Federal law, state laws that obstruct,
impair, or condition a national bank's
ability to fully exercise its Federally
authorized non-real estate lending powers
are not applicable to national banks.
(2) A national bank may make non-real
estate loans without regard to state law
. . .
(iv) The terms of credit, including
the schedule for repayment of
principal and interest, amortization
of loans, balance, payments due,
minimum payments, or term to
maturity of the loan, including the
circumstances under which a loan may
be called due and payable upon the
passage of time or a specified event
external to the loan; [and]
. . .
(x) Rates of interest on loans.
Thus, it seems clear that the NBA entirely preempts any state usury
In the present case, Defendant attempted to raise a usury
defense alleging that Plaintiff, a national bank, assessed usurious
interest rates in violation of North Carolina law. However, based
on the Supreme Court's holding in Beneficial National Bank
, a usury
claim under North Carolina law does not exist against Plaintiff as
a matter of law. See Beneficial National Bank
, 539 U.S. at 11, 156
L. Ed. 2d at 10. Unless Plaintiff waived this right, only the lawof the state in which Plaintiff is located can be applied to
determine the lawfulness of Plaintiff's actions. It appears
undisputed that Plaintiff's home state is South Dakota. Whether or
not the interest charged by Plaintiff is lawful in the state in
which its customer resides is irrelevant. For example, in
Marquette Nat. Bank v. First of Omaha Corp.
, 439 U.S. 299, 58 L.
Ed. 2d 534 (1978), the Supreme Court held that the NBA authorized
a national bank based in one state to charge its out-of-state
credit card customers an interest rate on unpaid balances allowed
by its home state, even though that rate was greater than that
permitted by the state of the bank's nonresident customers. Id.
313, 58 L. Ed. 2d at 545. Thus, the NBA completely preempts North
Carolina state usury laws, and Defendant's only remedy exists under
the laws of South Dakota, the state in which Plaintiff is located.
Defendant argues that Plaintiff, by citing North Carolina law
regarding attorney's fees in its complaint, either elected to apply
North Carolina law to the agreement, or waived its right to apply
federal law or South Dakota law. We disagree.
Defendant cites Morton v. Morton
, 76 N.C. App. 295, 332 S.E.2d
736, disc. review denied
, 314 N.C. 667, 337 S.E.2d 582 (1985), in
support of her argument that Plaintiff elected North Carolina law.
, a husband and wife executed a separation agreement in
at 298, 332 S.E.2d at 738. Our Court acknowledged
that "North Carolina has long adhered to the general rule that 'lex
loci contractus,' the law of the place where the contract is
executed governs the validity of the contract." Id.
However,North Carolina recognizes an important exception to this general
at 299, 332 S.E.2d at 738. "North Carolina case law
stresses that the express or implied contrary intent of the parties
rebuts the parties' presumed intent, i.e.
, the 'lex loci
contractus' rule." Id.
, our Court found the parties' implied intent to
apply North Carolina law to be clear based on the caption of the
separation agreement that read: "North Carolina Guilford County."
Additionally, the husband "complied with the North Carolina
statutory law on execution and acknowledgment of separation
agreements[,]" which was more demanding than the corresponding
Maryland law. Id.
at 299, 332 S.E.2d at 738-39. Thus, the parties
clearly intended to apply North Carolina law
In the instant case, however, it is clear the parties intended
federal law and South Dakota law to govern. The agreement
expressly states: "The terms and enforcement of this Agreement
shall be governed by federal law and the law of South Dakota, where
[Plaintiff] [is] located." Thus, it is clear that at the time of
the agreement's execution, the parties intended to apply federal
law and South Dakota law. Moreover, as demonstrated by the account
statements detailing Defendant's default, Plaintiff charged
Defendant interest and fees in accordance with federal law and
South Dakota law. We hold that simply by citing the North Carolina
provision for attorney's fees in its complaint, Plaintiff did not
rebut the presumption of lex loci contractus
Defendant also argues Plaintiff waived its right to applyfederal law or South Dakota law. "A waiver is sometimes defined to
be an intentional relinquishment of a known right." Guerry v.
, 234 N.C. 644, 648, 68 S.E.2d 272, 275 (1951). To
constitute a waiver, "[t]he act must be voluntary and must indicate
an intention or election to dispense with something of value or to
forego some advantage which the party waiving it might at his
option have insisted upon." Id.
"The waiver of an agreement or of
a stipulation or condition in a contract may be expressed or may
arise from the acts and conduct of the party which would naturally
and properly give rise to an inference that the party intended to
waive the agreement." Id.
Although Plaintiff cited the North Carolina provision for
attorney's fees in its complaint, we hold that Plaintiff did not
"intentional[ly] relinquish . . . a known right[,]" and thus did
not waive its rights under federal law or South Dakota law. See
, 234 N.C. at 648, 68 S.E.2d at 275. In support of
Plaintiff's motion for summary judgment, Plaintiff attached a copy
of the agreement to its affidavit. The agreement expressly stated
that the agreement would be governed by federal law and South
Dakota law. Plaintiff also attached to its affidavit all of
Defendant's account statements which reflected interest and late
fees calculated in accordance with federal law and South Dakota
law. In light of Plaintiff's attachments to its motion, it is
clear that Plaintiff never intended to waive its contractual
choice-of-law rights. Thus, the trial court correctly applied
federal law and South Dakota law in this matter. Defendant also argues that North Carolina's public policy
demands that we should apply North Carolina law in the present
case. However, as we have already held, this matter is preempted
by federal law. Therefore, we are without authority to require the
application of North Carolina law. Moreover, Plaintiff neither
elected to apply North Carolina law nor waived the application of
federal law or South Dakota law. Therefore, this argument lacks
merit. The trial court did not err by finding that North Carolina
law did not apply.
 In the alternative, Defendant argues the trial court erred
by entering summary judgment for Plaintiff because South Dakota
recognizes the doctrine of unconscionability. We disagree.
Defendant argues that South Dakota recognizes the doctrine of
unconscionability in consumer contracts and, therefore, Defendant's
proposed defense of unconscionability was not futile. Defendant
cites Durham v. Ciba-Geigy Corp.
, 315 N.W.2d 696 (S.D. 1982),
example of the doctrine of unconscionability as it applies under
South Dakota law. In Durham
, a South Dakota farmer sued, inter
, the manufacturer of an allegedly defective herbicide that had
allegedly damaged his crops. Id.
at 697. The jury determined that
the defendant had breached an express warranty. Id.
at 699. The
trial court found the defendant's disclaimer of warranty and
limitation of consequential damages to be unconscionable. Id.
Supreme Court of South Dakota affirmed, recognizing that "[o]ne-
sided agreements whereby one party is left without a remedy foranother party's breach are oppressive and should be declared
at 700-01. Therefore, the South Dakota
Supreme Court held the defendant's disclaimer of warranty and
limitation of consequential damages to be unconscionable and
contrary to public policy. Id.
is distinguishable from the instant case. Although in
, the defendant's disclaimer of warranty and limitation of
consequential damages were unconscionable, in the present case
Plaintiff charged interest that was expressly permitted by South
S.D. Codified Laws § 54-3-1.1 (Supp. 2003), provides:
Unless a maximum interest rate or charge is
specifically established elsewhere in the
code, there is no maximum interest rate or
charge, or usury rate restriction between or
among persons, corporations, limited liability
companies, estates, fiduciaries, associations,
or any other entities if they establish the
interest rate or charge by written agreement.
In the present case, the agreement provides that Plaintiff "may
increase [Defendant's] annual percentage rates (including any
promotional rates) on all balances to a default rate of up to
19.99% plus the applicable Prime Rate." Because the interest rates
charged by Plaintiff were expressly permitted by the agreement and
were in compliance with South Dakota law, the terms of the
agreement were not unconscionable.
Moreover, in the present case, although Defendant attempted to
assert the defense of unconscionability, we hold that this defense
was actually in the nature of a defense of usury. Defendant
characterizes her unconscionability defense as a challenge to a
"pattern of systematic manipulation" by Plaintiff. However,Defendant's proposed defense only challenged the fees and charges
Plaintiff sought to recover.
Because it merely challenged the fees
and charges, this claim was in the nature of a usury claim, which,
as we have already stated, is preempted by federal law. See
U.S.C. § 85. Accordingly, the trial court did not err by denying
Defendant's motion to amend or by entering summary judgment for
Judges LEVINSON and JACKSON concur.
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